Digital currencies not financial products, yet
The Australian Securities and Investments Commission (ASIC) does not believe bitcoins and other forms of digital currency, as yet, represent a financial product for the purposes of regulation.
The regulator has told the Senate Inquiry into Digital Currency that, as things currently stand, digital currencies do not fit the legal definitions of a 'financial product' because people don't need an Australian market license to operate a digital currency trading platform or to hold an Australian Financial Services License (AFSL) to trade, hold or provide advice on digital currency.
"Contracts for the sale and purchase of digital currencies are typically settled immediately and as a result are unlikely to be financial products (derivatives)," the ASIC submission said. "However, if there is a delay between the entry of the agreement to sell and the delivery of the digital currency, the contract may be a derivative and the financial services and financial markets regimes would apply in the normal way."
The submission said that ASIC had also considered how the law applies to facilities associated with digital currencies and it had come to the view that some facilities that were developed to enable the use of a digital currency to make payments might be a financial product that is regulated by ASIC (e.g. a bill payment facility utilising digital currencies may be a non cash payment facility).
However it said this would depend on the way the facility worked and its particular terms.
"Some other financial products that are associated with digital currency, such as contracts for difference over bitcoins, are also products that are regulated by ASIC," the regulator's submission said.
For its part, the Australian Taxation Office(ATO) has told the Senate inquiry that bitcoin is "a form of intangible property, is not money or currency, and its supply is not a financial supply for GST purposes.
"Its use is akin to barter," the ATO submission said.
However the ATO went on to say individuals who made personal use of bitcoin such as purchasing items for personal use where the cost was less than $10,000 would have no capital gains obligations, but that those who used for investment or business purposes might be subject to CGT when they disposed of bitcoin, in the same way they would be for the disposal of shares or similar CGT assets.
Further it said that individuals would be charged goods and services tax when they bought bitcoin, as with any other property and that businesses paid in bitcoin would need to include the amount, valued in Australian currency, in assessable business income.
AUTHOR
Mike Taylor
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